"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."--F.A. Hayek

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08 October 2011

Don't Hate the Player(s)

On the morrow of the Philadelphia Phillies being eliminated from the 2011 Major League Baseball playoffs I have been reading on facebook and elsewhere that the team was eliminated because the players didn't do "their job." Some have implied, while others have said explicitly, that based on how well the players are paid, this alleged failure is made worse. Incidental to this argument is that since the players are paid so handsomely, the cost of attending a baseball game (or any professional sporting event) has become prohibitive to the "common fan." The syllogism runs thus: the players demand a lot of money (to play a kids game!); the owners need to generate that money from somewhere; ticket prices are high, therefore the players are responsible for the high ticket prices. Ancillary to this is that thus they should perform at a level that brings the most pleasure to the fans (the high cost of attending an event should provide maximum utility).*

This is so common a refrain that it is almost cliché.It also has everything precisely backwards.

Major League Baseball consists of 30 teams, each has a pool of 40 players that can be available to fill a game-day roster of 25 positions.So at any given time, there are 1200 major leaguers, 750 of whom can play at any given time.**Supply of the number of teams, the number of players and the number of opportunities to watch baseball are limited.

The Phillies have a current streak of over 200 straight sell-outs at Citizens Bank Park, where a standing-room only ticket costs $17.The fact that there is tremendous demand for access to their games is what allows the team to charge what it does for seats (for a very formal and technical treatment of the elasticity of demand for major league baseball tickets, see here).Other factors include the per capita income of the Philadelphia area, the age of the stadium (and its amenities) and the team’s performance.

What does not determine the price to attend a game is what the Phillies have to pay the players.True, the Phillies need to field a good team to generate fan interest, and attendance, and I don’t deny that at the very margin there is a feedback loop.But the players salaries, league-wide, are a consequence of the interest the American people have in baseball and the fact that we will pay $25 to park far away from a ballpark, $40/seat, $5/hot dog or watch three minutes of commercials between every half-inning and two minutes between each pitching change, not a determinant.

Of course I wish the Phillies won last night.But they didn’t.And that has nothing to do with what they are paid.

I hope to get more into the economics of sports here, mostly for selfish reasons but also because it proves most of the truths about economics in general, is easy for most people to grasp and a lot more interesting than monetary theory and Keynesian rubbish.

Anyone interested in a great history of baseball, with a focus on the relationship between the owners and the players, should read The Lords of the Realm by John Helyar.I read this before the 1994 season and my interest in the business of sports has been piqued since.

*this is my blog, so I get to frame the syllogisms. I know this is a very rough sketch, but I was up late last night watching baseball so cut me some slack. Make comments and I will address any valid concerns there or in a later post.

**regular season, of course; rosters are expanded during the playoffs, but salaries are paid over the course of the regular season and based on the sample of work provided by any particular player over that span, so I’m sticking with this